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Selling out
Key points
- The legislation for the sale of a company into an employee ownership trust (EOT) is TCGA 1992 s 236H to s 236U. Certain relief requirements must be met.
- A disqualifying event occurs if the company ceases to satisfy any of the relief requirements. This will give rise to a significant capital gain and therefore tax liability.
- Trustees must decide to sell based on whether doing so is in the best interests of the company’s employees – whereas the individuals that founded the company and still own shares can decide whether to accept the offer.
- A major element that the trustees have to bear in mind is the capital gains tax – set at 20% for discretionary trusts.
- Clients should keep appropriate records of ex-employees as when they sell shares into an EOT they may need to trace them.
- Who should operate PAYE?
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